Asian shares, US dollar up after Trump tax talk

Regional shares and the US dollar rose yesterday after US President Donald Trump eased tensions with China and spruiked a "phenomenal" plan to overhaul American business taxes over "the next two or three weeks".

The Straits Times Index put on 0.66 per cent to close above 3,100 points for the first time since August 2015, maintaining its lead as the best performer in Asia with a 7.6 per cent gain this year.

"It is amazing how a world leader can influence the markets with just a few random words," CIMB economist Song Seng Wun said, referring to Mr Trump's remarks that he was on the verge of announcing the most ambitious tax reform plan since the Reagan era.

"And based on that one phone call with China, it now appears that the administration isn't going to tackle China head on, as Mr Trump had implied in his campaign rhetoric. That is positive, but he could change his mind."

In a White House meeting with airline executives, Mr Trump promised a "phenomenal" tax plan but offered no details.

CMC Markets analyst Margaret Yang noted that if massive tax cuts are implemented in the US, they will likely "inflate asset values, stimulate consumer spending and significantly boost corporate earnings of the world's largest companies".

"Markets are trying to price in all those factors," she added.

Despite the likelihood of disagreements in Congress before tax reform can be enacted, the greenback rallied 0.5 per cent against the Sing dollar to 1.4209 ahead of this weekend's summit between Mr Trump and Japanese Prime Minister Shinzo Abe.

The yen had weakened 1.13 per cent against the greenback on the possibility of Mr Abe making concessions, including investing in high-speed rail projects in California and Texas, to bolster Japan's most important bilateral relationship.

Meanwhile, gold sank 1.19 per cent on a firmer dollar and as the latest bullish US economic data fuelled rate hike expectations.